International Finance and Global Relations

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Countries are currently more proactively working together causing an increase in globalization. Globalization started after World War II but has accelerated considerably since the mid-1980 mostly because of technology being sought out overseas and more governments are refusing to protect their economy from foreign competition. Since international trade and globalization have been rising there is the need for more International laws. International law allow nations to work together cooperatively to make this globalizations possible through things like treaties and agreements for international trading. The exchange of goods across international borders needs to be regulated by laws so that countries can get along and problems and disagreements can be minimized. These laws are hard to establish because of the lack of a central world governing system but must be made and recognized in order for the interactions involving trade between all countries involved to be possible. Even with lack of a central global world leadership program, countries abide by these laws because they know that in order for mutual benefit they must get along. Things like natural law and the knowledge that another country will retaliate if one country does not hold up their end of the deal deters countries from breaking these agreements. International laws make trading easier for countries by forcing the parties to agree upon the rules and interactions that are in the best interests for everyone involved.

Along with international law comes the decision of countries to form international tariffs. Tariffs are a type of international law formed for reasons such as protecting internal and developing economies, protecting domestic employment, protecting consumers, national security and retaliation. Tariffs protect the internal economy and developing economies by increasing the cost of goods imported therefore restricting the amount of international trading that occurs. This in turn allows small companies and production of resources to be domestic and to become established. This also increases employment in the domestic country where the tariffs are being enforced. Tariffs also protects consumers when the governments of some nations place high tariffs on imports that they know are going to contain harmful products which will usually deter the trading of these goods. This also pertains to national security. Retaliation occurs when a country is trying to either protect their own economy or if a military action or war occurs then the other country may not agree with the decisions and a tariff will be placed on goods as punishment. Tariffs are basically taxes that add to the cost of imported goods by one of two ways; either by adding a fixed fee to a single unit of good or adding a percentage to the value of a good. Although most laws are needed for smooth interaction between nations, tariffs cause problems because they get in the way off a natural flowing free trade system. The reduction of tariffs between international nations would further increase international trade and benefit globalizations in general allowing the best allocation of world resources.

Regional trade blocks can contribute to transition countries’ economic stabilization but they also carry risks of diverting trade from potentially more beneficial trade partnerships with other countries. Ten transition countries in Central and Eastern Europe and the Baltic’s have applied for membership in the European Union, and nearly all transition countries have applied to join the World Trade Organization (WTO). Joining the WTO would provide countries with protection particularly quotas which still hinder their exporting many goods to developed countries. Among these goods are agricultural products, iron and steel, textiles, footwear, and many others which may have comparative advantages. Joining the WTO would not only present rights on transition economies, it would also require them to meet certain obligations, such as maintaining low and abolishing non-tariff barriers. A major challenge for transition economies is finding their place in the worldwide division of labor. In many cases that means diversifying the structure of exports, particularly to developed countries.

The increase in international trade and the better allocation of world resources would be beneficial to countries involved because it would increase choices for consumers and also reduce prices. This would also allow countries to use their own resources to make the goods that are most desirable and most efficient to produce from an economic standpoint and import goods that were less efficiently produced with the resources available. Correct allocation of resources is important for countries so they can maximize profits, lower cost and use their resources to produce the goods most desirable to consumers the time.

Source by John Bozzelli

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